Bank Frauds, Wilful Defaults, NPAs and Write-offs: Banks Cheated in Modi Years

One phenomenon common to the years of the Narendra Modi government and the current economic slowdown is bank frauds. According to the Reserve Bank of India’s annual report 2018-19, the total amount involved in bank frauds was to the tune of Rs 71,542.93 crore in 2018-19 as compared to Rs 41,167.04 crore in 2017-18, a substantial 73.8% rise. The figure was Rs 10,170.81 crore in 2013-14, the year before the Bharatiya Janata party came to power, which has now increased by seven times.

Consider the year-wise number of such frauds. Banks reported 6,801 cases of frauds in 2018-19, 5,916 cases in 2017-18, 5,076 cases in 2016-17, 4,693 cases in 2015-16, 4,639 cases in 2014-15 and 4,306 cases in 2013-14. This massive and continuous rise in the number of such fraudulent cases signifies not only the inefficiency curtailing the banking sector but also the government’s oversight towards such offences.

As per the RBI, among bank groups, Public Sector Banks (PSBs), which constitute the largest market share in bank lending, have accounted for the bulk of frauds, which is 90.2% of the total amount involved in bank frauds reported in 2018-19, followed by private sector banks (7.7%) and foreign banks (1.3%). In terms of the number of frauds, share of PSBs is 55.4%, private banks 30.7% share, and foreign banks 11.2%.

Also watch: How will India Protect Its Banks from Big Corporate Defaulters?

The role of government is significant in understanding why PSBs have been falling for bank frauds. One reason frequently highlighted by analysts has been that the PSBs fall to the pressure of the governments (both state and central) when it comes to disbursal of loans. This in turn has contributed to both the rise of non-performing assets (NPAs) and bank frauds.

Furthermore, the RBI stated that the average lag between the date of occurrence and its detection by banks was 22 months. However, the average gap for large frauds, Rs 100 crore and above, amounting to Rs 52,200 crore reported during 2018-19, was 55 months.

Alongside the bank frauds, a look at how the banks have written-off NPAs while giving free hand to wilful defaulters is pertinent in understanding how the banking sector has worsened during the Modi years at the cost of public money.

Between 2014 to 2018, Modi’s first term, banks have written off bad loans (NPAs) worth a mind-boggling Rs.5.56 lakh crore, as per the RBI’s response to an RTI. This is about four-fifths of the total amount written off (Rs 7 lakh crore) between 2008 to 2018. ‘Write off’ means that the unreturned bank loans are put in the category of uncollectible debt. For instance, while the total amount of NPAs was Rs 10.3 lakh crore at the end of March 2018, it came down to banks Rs 9.34 lakh crore a year after as banks wrote off a record Rs 2.54 lakh crore of bad loans in 2018-19.

The rise in wilful defaulters and their sudden disappearance whenever their fraud comes to light has also affected the banking sector in Modi years. The total number of wilful defaulters increased by 60% to 8,582 at the end of March 2019, compared to 5,349 in 2015, as per data provided by the finance ministry in the last Parliament session. While these wilful defaulters owe a total amount of Rs.1.55 lakh crore to banks, the government claimed that about Rs 7,600 crore has been recovered from them or their entities so far.

The above numbers reveal not only the loot of public money but the lack of accountability on the part of both the government and the RBI as well.

Also read: Corporate Bonanza: Trend of Writing off Bad Loans Continues